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AHSS 1030 (3)
Chapter 7

Chapter 7 - Decision Making and Creativity.doc

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AHSS 1030
Pierre Mc Clelland

Chapter 7 - Decision Making and Creativity Thursday, March 7, 2013 1:56 AM • Decision making is the conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs. RATIONAL CHOICE PARADIGM OF DECISION MAKING • rational choice paradigm, which has dominated decision making philosophy in Western societies for most of written history • Subjective expected utility is the probability (expectation) of satisfaction (utility) for each specific alternative in a decision. • Rational choice assumes that decision makers naturally select the alternative that offers the greatest level of happiness (i.e., maximization), such as highest returns for stockholders and highest satisfaction for customers, employees, government, and other stakeholders. • The first step is to identify the problem or recognize an opportunity. A problem is a deviation between the current and the desired situation—the gap between “what is” and “what ought to be.” This deviation is a symptom of more fundamental causes that need to be corrected.6 An opportunity is a deviation between current expectations and a potentially better situation that was not previously expected. • The second step involves deciding how to decide; that is, what processes to apply to make the decision. • One issue is whether the decision maker has enough information or needs to involve others in the process. • Another issue is whether the decision is programmed or nonprogrammed. Programmed decisions follow standard operating procedures; they have been resolved in the past, so the optimal solution has already been identified and documented. • In contrast, nonprogrammed decisions require all steps in the decision model because the problems are new, complex, or ill-defined. • The third step is to discover and develop a list of possible solutions. • The rational choice paradigm seems so logical, yet it is impossible to apply in reality. One reason is that the model assumes people are efficient and logical information processing machines. • The second reason why the rational model doesn't fit reality is that it focuses on logical thinking and completely ignores the fact that emotions also influence —perhaps even dominate—the decision making process. IDENTIFYING PROBLEMS AND OPPORTUNITIES • Stakeholder Framing Employees, suppliers, customers, and other stakeholders have vested interests when bringing good or bad news to corporate decision makers. Often unwittingly, they filter information to amplify or suppress the seriousness of the situation. By framing the situation, stakeholders throw a spotlight on specific causes of the symptoms and away from other possible causes. Stakeholders also frame problems in ways that raise the value of resources they can provide to help the organization solve those problems. • Mental Models Even if stakeholders don't frame information, our mind creates its own framing through preconceived mental models. Mental models are visual or relational images in our mind of the external world; they fill in information that we don't immediately see, which helps us understand and navigate in our surrounding environment. • Decisive Leadership According to various studies, employees believe that decisiveness is a characteristic of effective leaders. Being decisive includes quickly forming an opinion of whether an event signals a problem or opportunity. • Solution-Focused Problems Decision makers have a tendency to define problems as veiled solutions. For instance, someone might say: “The problem is that we need more control over our suppliers.” This statement doesn't describe the problem; it is really a slightly rephrased presentation of a solution to an ill-defined problem. Decision makers engage in solution-focused problem identification because it provides comforting closure to the otherwise ambiguous and uncertain nature of problems. • Perceptual Defence People sometimes block out bad news as a coping mechanism. Their brain refuses to see information that threatens their self- concept. This phenomenon is not true for everyone. Some people inherently overlook negative information, whereas others are more aware of it. • but one way to improve the process is by becoming aware of the five problem identification biases just described. For example, by recognizing that mental models restrict a person's perspective of the world, decision makers are more motivated to consider other perspectives of reality. Along with increasing their awareness of problem identification flaws, leaders require considerable willpower to resist the temptation of looking decisive when a more thoughtful examination of the situation should occur. • A third way to improve problem identification is for leaders to create a norm of “divine discontent.” • employees can minimize problem identification errors by discussing the situation with colleagues. SEARCHING FOR, EVALUATING, AND CHOOSING ALTERNATIVES • The rational choice paradigm assumes that organizational goals are clear and agreed-on • Unfortunately, organizational goals are often ambiguous or in conflict with each other. • Consequently, as a new alternative comes along, it is immediately compared to an implicit favourite—an alternative that the decision maker prefers and that is used as a comparison with other choices. When choosing a new computer system, for example, people typically have an implicit favourite brand or model in their heads that they use to compare with the others. This sequential process of comparing alternatives with an implicit favourite occurs even when decision makers aren't consciously aware that they are doing this • Biased Decision Heuristics o Three of the most widely studied heuristic biases are anchoring and adjustment, availability, and representativeness: • Anchoring and adjustment heuristic. • Availability heuristic. • Representativeness heuristic  Another form of the representativeness heuristic, known as the clustering illusion, is the tendency to see patterns from a small sample of events when those events are, in fact, random • One of the main assumptions of the rational choice paradigm is that people want to—and are able to—choose the alternative with the highest payoff (i.e., the highest “utility” in subjective expected utility). • People satisfice when they select the first alternative that exceeds a standard of acceptance for their needs and preferences. • This necessarily calls for a satisficing decision rule—choose the first alternative that is “good enough.” • A second reason why people engage in satisficing rather than maximization is that they lack the capacity and motivation to process the huge volume of information required to identify the best choice. • Emotions Form Early Preferences The emotional marker process described in previous chapters determines our preferences for each alternative before we consciously think about those alternatives. Ultimately, emotions, not rational logic, energize us to make the preferred choice. In fact, people with damaged emotional brain centres have difficulty making choices. • Emotions Change the Decision Evaluation Process A considerable body of literature indicates that moods and specific emotions influence the process of evaluating alternatives. Overall, emotions shape how we evaluate information, not just which choice we select. • Emotions Serve as Information When We Evaluate Alternatives The third way that emotions influence the evaluation of alternatives is through a process called “emotions as information.” Most emotional experiences remain below the level of conscious awareness, but people actively try to be more sensitive to these subtle emotions when making a decision. • Intuition is both an emotional experience and a rapid nonconscious analytic process. • These signals warn us of impending danger, such as a dangerous mine wall, or motivate us to take advantage of an opportunity • All gut feelings are emotional signals, but not all emotional signals are intuition. • whether the emotions we experience in a situation represent intuition or not depends largely on our level of experience in that situation. • action scripting is a form of programmed decision making. Action scripts are generic, so we need to consciously adapt them to the specific situation. • By systematically assessing alternatives against relevant factors, decision makers minimize the implicit favourite and satisficing problems that occur when they rely on general subjective judgments. This recommendation does not suggest that we ignore intuition; rather, it suggests that we use it in combination with careful analysis of relevant information. • A second piece of advice is to remember that decisions are influenced by both rational and emotional processes. IMPLEMENTING DECISIONS • translating decisions into action—is one of the most important and challenging tasks of leaders. EVALUATING DECISION OUTCOMES • One problem is confirmation bias (also known as post-decisional justification in the context of decision evaluation), which is the “unwitting selectivity in the acquisition and use of evidence.”When evaluating decisions, people with confirmation bias ignore or downplay the negative outcomes of the selected alternative and overemphasize its positive outcomes. • Unfortunately, it also inflates the decision maker's initial evaluation of the decision, so reality often comes as a painful shock when objective feedback is finally r
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